Don't Even Think About Buying Canopy Growth Stock Until You Read This Brutal Reality Check

Canopy Growth (NASDAQ: CGC) is a high-risk investment. The stock has lost over 95% of its value since its initial public offering. There was material excitement around marijuana stocks and Canopy Growth a few years ago, but the company has not lived up to Wall Street's perhaps overzealous expectations. Now is probably not the time to jump aboard.

Canopy Growth falls to $1

At one point in 2019, a share of Canopy Growth would have cost over $560 (after adjusting for reverse splits). Today, that same share would fetch a little over a buck. It has, basically, gone from being a Wall Street darling to being a penny stock. Penny stocks are high-risk investments that have a history of not working out well for shareholders.

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A company doesn't find itself in penny stock land for no reason. One material problem for Canopy Growth is its history of losing money. In fact, after roughly a decade of being a public company, it still hasn't posted positive earnings. It's easy to understand why investors are tired of waiting around.

Canopy Growth's good news is also bad news

In late 2025, meanwhile, the company announced that it had recapitalized its balance sheet. That is a positive event for the company, but not a good thing from an investor's standpoint. Essentially, the company's financial condition was so weak that it had to cut deals with its bondholders. Notably, the company had to issue warrants as an enticement for the bondholders to play along. If those warrants are exercised, they will lead to shareholder dilution.

At the same time, the company is moving forward with its acquisition of MTL Cannabis. This, despite being a money-losing business that just had to recapitalize its balance sheet. Buying MTL Cannabis will strengthen Canopy Growth's position in the medical marijuana space. However, it is a cash-and-stock deal. So it puts more strain on Canopy Growth's balance sheet and will result in shareholder dilution.

Everything could work out fine... or not

It is entirely possible that Canopy Growth becomes a sustainably profitable business. In fact, it would be easy enough to focus only on the positive side of recent corporate events. But it is also possible that this money-losing penny stock is overextending itself. If that's the case, it could have trouble remaining a going concern. The risk-versus-reward profile for this marijuana stock is tilted too far toward risk for all but the most aggressive investors.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.